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Dear John,
How are you?
I hope you are doing well,
Please sir in regards to this information which is mentioned in Kaplan kit question number 59.Units produced. 500
Time taken. 200 hrs.
Maximum time available. 200 hrs
Material purchased 1000kg for $3000
Material used 800kg.
Labour costs. $2000
Overheads. $1500
Sales $9000.
Required is TAR?I have noticed that he deducted the full amount of material I mean he has used just 800 kg but he deducted the cost for 1000 kg I don’t know why? And also I don’t know what is the point behind?
It is a slightly silly example. We do use the material purchased because throughput accounting assumes that they operate a just-in-time inventory system i.e. keep minimum inventories. The reason it is a slightly silly example is that with just-in-time the materials purchased and materials used should in fact be the same.
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